Page 72 - Economic Damages Calculation

ter. It had also never earned any profits under the venture. Thus, the court concluded the venture under
the third party contract "was a start-up business with no operational history." fn 26

In affirming summary judgment, the court found that "Gorjuice’s alleged lost profits [were] too remote
and speculative to satisfy the damages threshold established by the case law." fn 27

The cases described earlier in this section suggest that the court would likely have determined that the
10 months of operation of the "computer lounge and facility" would lead to a characterization of the
business as "new." However, the court also pointed to the two-and-one-half years that the plaintiff had
failed to show profits with an arguably predecessor business. This case demonstrates that for businesses
that have some (but not extensive) operating histories, a court may look to its actual performance during
that period when making a determination as to whether it is "new" or "unestablished."

What does "Sufficiency of Analysis" Mean?

As introduced in the earlier sections of this chapter, the trend toward allowing recovery of lost profits for
a new business is to focus on "evidentiary sufficiency" to calculate damages. Case law provides some
insight into what courts may require to meet this standard for calculating damages for new businesses. In
this context, courts are often concerned with the facts and analyses provided by an expert when calculat-
ing damages for a new business. The standard discussed by Judge Posner in MindGames, Inc. v. Western
Publishing Co. fn 28 is typical of the threshold of evidence required by courts. In that case, Judge Posner
called for consideration of all information available that is relevant in evaluating whether the expert has
met the threshold to prove the lost profits of a new business — a rule of evidence.

In Chung v. Kaonohi Center Co. fn 29 (which is discussed in more detail in the following section "Cases
Addressing Assumptions and Substantial Similarity to the Matter at Hand"), the court addressed whether
the plaintiff could recover for the defendant’s breach of a lease for a new restaurant to be constructed in
a mall. The Supreme Court of Hawaii rejected the defendant’s argument that recovery was barred as a
matter of law, but found that, although recovery of future lost profits was allowable, evidence must be
provided to establish with reasonable certainty such future lost profits. The sufficiency of evidence was
a factual inquiry based on the particular circumstances of each case.

Of course, the evidence necessary to show future profits with reasonable certainty depends on
the circumstances of each individual case. While absolute certainty is not required, the court or
jury must be guided by some rational standard in making an award for loss of future profits. fn 30

Similarly, in Kids' Universe v. In2Labs, fn 31 the Court of Appeal of California (Second Appellate Dis-
trict) relied in part on the Restatement (Second) of Torts as support for its finding that recovery for fu-

fn 26 Id. at *38.

fn 27 Id.

fn 28 218 F.3d 652 (7th Cir. 2000).

fn 29 618 P.2d 283 (Haw. 1980).

fn 30 Id. at 291 (citations omitted).

fn 31 116 Cal. Rptr. 2d 158 (Cal. Ct. App. 2002).

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